Uruguay Central Bank Statement

Author: | Published: 5 Sep 2017

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Uruguay has showed an outstanding macroeconomic
performance (averaging 4.4% annual GDP growth over the last 10
years and 1.5 % in 2016), even though the regional environment
has remained uncertain in the last years.

Uruguay is experiencing its longest period of
non-interrupted growth, which is supported by a strong
institutional environment and a healthy financial stability
framework. This performance allows a major fall in poverty and
a generalised improvement in our human development indicators.
According to United Nations' Economic Commission for Latin
America and the Caribbean (ECLAC), Uruguay was first in poverty
reduction among Latin American countries between 2010 and
2016.

After the shift in 2013 to manage monetary aggregates as the
intermediate target, the Bank has successfully complied with
the scheduled reduction in money growth causing a key point to
download inflation to enter the target zone. Inflation had a
descending path during 2016, reaching 8.1% by the end of the
year and the 3%-7% target range by march of 2017. One of the
main concerns for the Central Bank is to keep working in an
effort to keep inflation expectations anchored.

The result of this successful policy has been reflected in
the improvement of sovereign credit ratings during 2016 and
2017. A prudent management of fiscal policy provoked the
decrease in the net public debt to GDP ratio from 51% in 2005
to 30% in 2016. This achievement has been enhanced by an
increase in its average maturity and a decrease in the foreign
currency denominated share from almost 100% in 2002 to 16%
(this ratio corresponds to net public debt) by 2016.

Systemic risk remains low in the Uruguayan financial system
due to the large reduction of liabilities and deposits
dollarization that followed the 2002 financial crisis, the
notable decline in currency mismatches – both in the
public and the private sector balance sheets – and the
continuing efforts to strengthen the financial safety net. To
make a joint systemic risk assessment of the financial system,
a Financial Stability Committee started to operate in 2011.

Total banking credit to the private sector was nearly 30% of
GDP in 2016, while short-term liquidity exceeded 54% with an
average Capital Adequacy Ratio of over 13%.

The government and the Bank are taking the challenge of
improving financial inclusion and financial markets
development, not only improving the access of low income
households to the financial sector but also enhancing financial
literacy in order to help domestic agents' financial
decision-making process.